http://www.youtube.com/watch?v=BPoltsloDXE
With all the news coverage about the ill state of financial affairs in The US, it’s important to understand the true definition of a budget cut.
What it’s not:
When a politician says budget cut, that’s referring to a cut in the proposed amount of money Congress would like to spend in the upcoming year. It’s not a cut in the amount of money that was spent the year before or that’s currently being spent.
All government programs (ie: Medicare, Medicaid, Social Security) are on auto pilot to increase every year. So Congress automatically spends more money than they did last year. As a result the size, scope, and power of government increases each year.
Example: You make $50,000/yr and spend every penny on living expenses. You aren’t saving a dime. Come end of the year you decide you want to live on $75,000 next year. But you don’t increase your income. So you just borrow the extra $25,000 and hand the IOU to your neighbor, a friend, or a stranger.
That’s how Congress does it each and every year. They spend more than they did the year before. And they keep borrowing money from The Federal Reserve to do it. The paper currency you hold in your purse or wallet is the IOU. Will The US ever be debt free?
What it is:
A true budget cut should be correctly referred to as a spending cut. This begins first and foremost when you –
1) STOP BORROWING MONEY. You can’t borrow your way out of debt.
2) Decrease your expenses. This means you have to live on less than you make.
3) Pay off debts.
4) Save and Invest.
That’s responsible money management.
Until you can do 1 thru 4 above, it’s tough to complain how inept Congress is with your tax dollars. Start cleaning up your own house first. Then, along the way, expect it of your elected officials.
The best book I’ve ever read on this subject is:
Common Cents: A Retiring Six-Term Congressman Reveals How Congress Really Works-And What We Must Do to Fix It – by Timothy J. Penny; Major Garrett
Get the book. Read it. Pass it on to a friend.
To Your Financial Freedom,
Greg Whitaker
